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Oregon House Democrats propose higher taxes for corporations, wealthy

BY Harry Esteve and Jeff Mapes

05/22/2009

by Harry Esteve and Jeff Mapes on 5/14/09.

SALEM -- The state can ease its budget crisis by increasing taxes on corporations and adding a new, higher tax bracket for Oregon households that make more than $250,000 a year, a group of House Democratic leaders said Thursday.

The tax increases, which could add half a billion dollars or more to the state's general fund, emerged as the centerpiece of the House Democrats' plan to deal with an expected two-year budget shortfall of up to $4 billion.

The budget-balancing plan also calls for cutting between $1.5 billion and $2 billion in education and state services. Lawmakers would use reserves and federal stimulus money to patch the remaining holes.

"We won't balance the budget on the backs of the middle class or working folks," said House Majority Leader Mary Nolan, D-Portland.

Tax proposals that have received the most attention in recent weeks have been an increase in the $10 minimum tax paid by most Oregon corporations and a new tax bracket of 11 percent for households making more than $250,000 a year. Currently, Oregon's tax brackets top out at 9 percent.

Combined, those two tax increases could raise $500 million to $700 million over two years, according to estimates.

About 31,000 Oregon households report incomes of $250,000 and up, state officials say.

Nolan, House Speaker Dave Hunt, D-Gladstone, and the budget chairman, Rep. Peter Buckley, D-Ashland, said the plan would be pitched to the public as one of fairness, with corporations and the wealthy picking up a bigger share of the overall state tax burden.

The group offered few specifics, saying it will wait until after the quarterly revenue forecast. The economic prediction comes out today and will tell lawmakers how much money they have to spend over the next two years.

Expectations were that revenues would continue to slip, leaving the state with about $13 billion in general fund and lottery revenues to spend over the next two years. The cost of providing state services at their current level is expected to rise to about $17 billion.

Boosting taxes in the middle of a recession could prove tricky in the Legislature, even though Democrats have enough votes to pass it in both chambers. It's unclear, for example, whether Senate Democrats have the same enthusiasm for a tax-the-rich plan.

The absence of any Senate Democrats at the news conference was conspicuous. And Senate President Peter Courtney was noncommittal when asked about the plan.

A big question is whether conservative groups would gather signatures to put such a tax increase on the statewide ballot. Nolan dismissed that concern, saying the public supports higher taxes on the wealthy.

Conservative activists were split about whether they could wage a successful ballot campaign to overturn an income tax surcharge that raises taxes on a small percentage of Oregonians.

"We'll have to look carefully at it ... because it is more difficult," said Walker, who as head of FreedomWorks in Oregon would supply much of the organizational and financial muscle for a referral effort. He said his group may instead focus on collecting signatures to refer an expected increase to the gas tax to the ballot.

But Oregon Republican Chairman Bob Tiernan predicted a successful campaign could be waged against higher taxes for wealthier households by arguing that it would hit small-business owners who generate Oregon jobs.

"If there is any kind of income tax increase on the richest or the poorest, the Oregon Republican Party will refer it to the ballot," he said.

Ballot initiative activist Sizemore disagrees. It's useless for conservatives to wage what he predicts would be an unsuccessful effort to repeal Democratic tax increases, he said.

"Oregon voters are quite conservative when it comes to broad-based taxes that affect most taxpayers," he wrote in a blog post. "Give them a chance to tax the 'wealthy,' and they will likely do so."